The economic case for cooperatives in developed and developing - - PowerPoint PPT Presentation

The economic case for cooperatives in developed and developing countries: are there any special characteristics in particular country settings: A case of Mondragon, Spain and Kenya Otieno Steven Country Representative, Kenya 26th March 2019, NAIROBI-KENYA

Established in 1916, NCBA CLUSA is the oldest and largest U.S. trade association for cooperatives—representing all co-op sectors. Sectors Examples

The National Cooperative Business Association CLUSA International

Food Credit Unions Financial Services Child Care & Preschool Co-op Breweries Healthcare Agriculture Retail Electric Worker Purchasing Credit Union Housing

Cooperatives building an Inclusive Economy

In 2017, the NCBA CLUSA Board adopted a vision that positions the association as a collaborative partner in, advocating for and driver of: An Inclusive Economy in which people around the world are empowered to contribute to shared prosperity and well- being for themselves and future generations NCBA CLUSA will leverage the co-operative model and the shared resources of our movement to engage, partner with and empower people from all walks of life, and in particular those left behind by a shifting economy who face the greatest barriers to achieving this goal.

Kenya

An overview of a journey from 1908

• It is comprised of over 22,000.

registered Co-operative Societies

• Has a membership of over 14 million

people.

• Co-operatives cut across all sectors
• f the national economy such as

financial, agricultural, housing, transport among others

• Has total asset base of over Kshs. 800

billion;

• With mobilized savings in excess of

US$ 6.4 billion constituting over 48% of national savings (IMF, World Bank Economic Outlook 2014), which has significantly contributed to the provision of affordable credit.

The leading cooperative nation-state in Africa

An overview of a journey from 1908

• The total affordable credit to the co-operators stood at US$ 3.31 Billion in

2017 with a recent survey that covered a period of 5 years revealing that;-

• US$ 1.18 Billion or 36% credit financing went to land & housing
• US$ 670 Million was channeled to the trade sector accounting for

20.5%

• Financing of consumption & social activities accounted for US$ 470

Million or 14.5% of the total credit given by the Sacco sector.

• Education & agricultural sectors received Kshs. 39 Billion & 21 Billion

respectively or 12 % of total credit financing.

• On employment, Co-operatives secures direct and indirect livelihoods to

around 32 million Kenyans that is two-thirds of our population;

• Employs over 600,000 persons directly.

Salient challenges in the cooperative sector

• High cost of finance in Kenya

thereby making credit expensive;

• Inadequate market access;
• Indebtedness by co-operative

enterprises particularly those engaged in commodities and agricultural production;

• Inadequate research in emerging

co-operative products and services;

• Low participation of youth, women

and people living with disabilities

• Low adoption of ICT and use of

manual (paper-based) operations;

• Lack of credible data and

information

• Weak governance in co-operatives;
• Lack of harmonization of the co-
• perative legal framework with the

Constitution of Kenya (2010); resulting to inadequate supervision and audit at the county level leading to loss of members contributions.

• The dual legal incorporation of co-
• peratives under both the Companies

Act, and the Co-operative Societies Act which complicates supervision and regulation.

• Indebtedness by co-operatives

particularly those engaged in commodities and agricultural production;

Remedial action towards enabling the co-operative business model

• Finalize and implement the National Cooperative Development Policy

and the related legislations.

• Put in place good co-operative governance with a clear separation

between the roles of the management and the board

• Widen the role of Sacco’s to not only undertake savings mobilization,

investments and credit management but also to venture into; participating in the National Payment System; Agency Banking and Share Trading.

• The Agricultural Co-operatives are expected to play a critical role in the

various value chains in terms of:-

• Adoption of mechanisation and provision of farm inputs to their members to improve

production

• Getting markets for the agricultural produce for the members.
• Carry out value addition on the raw produce for increased incomes.
• Access government support e.g. of transportation and improved storage technologies such

as milk coolers and silos.

• Introduction of Co-opFarms
• Co-operative Civic Education, Training & Research is being enhanced as upheld by

the co-operative values and principles.

• ICT adoption to enhance efficiency and protect against cybercrime/fraud.

Mondragon, Spain

Spain; The Mondragon model in the Basque Country

Mondragon model founded in 1956 by Father José María Arizmendiarrieta, the Mondragon Cooperative Corporation currently consists of 102 federated cooperatives employing over 73,000 people.

Foundation of the Mondragon model “Nothing differentiates people as much as their respective attitudes to the circumstances in which they live. Those who opt to make history and change the course of events themselves have an advantage over those who decide to wait passively for the results of the change. ”Jose María

Arizmendiarrieta (1915 – 1976)

Mondragon, Spain - as a non-capitalist alternative model

Mondragon Corporation (MC) is the most successful business group in the Basque Country, and the seventh largest in Spain; as a cooperative group it is unique in the world

Mondragon proves this dichotomy as incorrect;

• It has created a

cooperative structure which is highly competitive in the capitalist market.

• It is highly egalitarian

and democratic in its approaches to management It is argued that a company cannot be both efficient and equitable at the same time;

• Efficiency is associated with traditional capitalist

companies, which pursue it at the expense of equity; meanwhile equity is associated with cooperatives, and is perceived as a trade-off for expansion and efforts to become truly competitive.

• A choice is often made between small equitable

cooperatives and efficient competitive companies, in a global economy and market logic in which no other

• ption seems possible.

Mondragon, Spain - as a non-capitalist alternative model

The five successful actions also reflect this approach

• Created a banking system to

connect all the individual cooperatives;

• It re-invests its profits
• Emphasizes a humane management
• rientation;
• It reinforces both open intellectual

debates and grassroots democracy,

• It has created its own social security

system.

The Mondragon Corporation, a group of cooperatives, is a thriving example of how cooperatives can succeed.

Developed on 6 features that show this humanistic focus

• Democracy leading to

competitiveness,

• Solidarity in profit for economic

growth,

• Solidarity among workers across the

corporation,

• An egalitarian salary scale,
• Maximum job security and minimum

temporary work,

• Specific advantages for members.

Mondragon, Spain – aspirations and impact

• Has most equal income distribution, and thus the fewest social inequalities
• In the Basque Country in general, the unemployment rate is currently 8,8% compared

to 20,8% in Spain overall, a factor attributed to the Mondragon corporation

• Frequently, cooperatives limit their economic activity to small, marginal markets, and

either subsist on state subsidies or require that their workers to make great sacrifices (self-exploitation) in order to survive.

• The choice to be a cooperative is often based on ideology rather than efficiency.
• The cooperatives within Mondragon Corporation, however, are competitive in

different sectors of the economy including: industry, distribution, finance and knowledge.

Thank You

National Cooperative Business Association NCBA CLUSA International Program 1775 Eye Street, NW • 8th Floor Phone: (202) 638-6222 Email: info@ncba.coop Web site: http://www.ncba.coop